IndoDefense 2025: Indonesia and South Korea sign new deal for delivery of 48 KF-21 jets and preservation of joint production
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On June 10, 2025, during IndoDefense 2025, South Korea and Indonesia finalized a revised agreement that adjusts Jakarta’s financial contribution to the KF-21 Boramae fighter jet development program. The agreement was reached during a trilateral meeting in Jakarta attended by South Korean Defense Minister Shin Won-sik, Indonesian Defense Minister Prabowo Subianto, and Hanwha Aerospace CEO Son Jae-il. The updated contract reduces Indonesia’s share from 1.6 trillion won (approximately $1.168 billion) to 600 billion won (approximately $438 million).Follow Army Recognition on Google News at this link
The initial financing agreement for the KF-21 Boramae called for South Korea to fund 60 percent of the project, Korea Aerospace Industries (KAI) 20 percent, and Indonesia the remaining 20 percent. (Picture source: KAI)
In addition to modifying the financial contribution, the agreement establishes an alternative payment structure, reaffirms the planned transfer of 48 aircraft to Indonesia, and confirms the continued participation of PT Dirgantara Indonesia (PTDI) in production. The renegotiation follows delays in payments, repeated discussions over the past five years, and concerns raised by South Korea in 2024 over Indonesia’s fulfillment of its obligations.
The revised amount of 600 billion won (approximately $438 million) represents a significant reduction from the original commitment, with the updated contract stipulating that Indonesia must pay 30 billion won (approximately $21.9 million) within 90 days of the agreement’s signing. Jakarta has already transferred 9.4 billion won (approximately $6.86 million) as an initial payment. According to South Korea’s Defense Acquisition Program Administration (DAPA), the revised arrangement maintains Indonesia’s 48-aircraft allocation and includes provisions allowing Indonesia to settle part of its contribution through alternative payments, including commodities such as palm oil and coffee. This barter arrangement had previously been discussed in 2022 and is now formally integrated into the contract. The revised deal does not change Indonesia’s stake in the number of aircraft but reflects a financial reassessment in light of prior delays and renegotiations.
Indonesia’s payments to the KF-21 program began falling behind as early as 2019. As of late 2023, Jakarta had contributed only 278.3 billion won (approximately $203.16 million), significantly below the amount originally agreed upon. Negotiations continued over several years without resolution, despite a visit by Prabowo to South Korea in 2020. The South Korean Ministry of National Defense, particularly through statements made by Minister Shin in April 2024, publicly emphasized that Indonesia would need to honor its financial obligations in order to remain part of the program. Without revised terms, Indonesia risked exclusion from the development and production phases. The new agreement is the result of these protracted discussions and introduces a clearer payment schedule, alternative settlement options, and the confirmation of Indonesia’s industrial and procurement role.
The KF-21 joint development program began with a memorandum of understanding signed in 2010 and was formally launched in 2015. The initial financing agreement called for South Korea to fund 60 percent of the project, Korea Aerospace Industries (KAI) 20 percent, and Indonesia the remaining 20 percent. As the program advanced, several structural and political changes occurred. In March 2024, Hanwha Aerospace replaced KAI as the program’s prime contractor, becoming responsible for overall project management. This internal change placed Hanwha in a leading position for further negotiations, including the June 2025 meeting in Jakarta. In addition to continuing its payment obligations, Indonesia will retain involvement in parts manufacturing through PTDI, which is assigned to produce fuselage and airframe components.
Under the revised agreement, Indonesia’s role in the program will continue through PTDI’s manufacturing of aircraft components and future involvement in maintenance and support operations. This arrangement ensures that Indonesia remains integrated in the program’s industrial and logistical network, including support infrastructure for the 48 aircraft it will acquire. The ability to provide commodities for partial payment also aligns with previous suggestions made by Indonesian authorities, who had proposed offset mechanisms during earlier discussions. The contract enables Indonesia to avoid program withdrawal and preserves the structure of bilateral cooperation. Although Indonesia’s financial share has been lowered, the country retains access to both operational assets and domestic industry participation.
The South Korean government views the resolution of the issue as a step that enables the program to proceed without the uncertainty caused by unpaid contributions. Production of the KF-21 is scheduled to begin by the end of 2026. Currently, six prototypes are undergoing flight testing. These trials have included supersonic flight and weapons carriage, with recent images confirming the presence of the IRIS-T short-range air-to-air missile on at least one aircraft. The KF-21 is designed to replace older F-4 and F-5 fighter aircraft within the South Korean Air Force. With the revised agreement, Indonesia remains the only international partner in the program, and its continued presence could support South Korea’s efforts to export the KF-21 to additional markets.
The renegotiated terms may also serve as a model for future international cooperation frameworks where partial payments and industrial participation are adjusted based on national economic conditions. Hanwha Aerospace is now expected to lead export-related discussions, leveraging Indonesia’s continued involvement as a demonstration of international collaboration. Potential markets for the KF-21 include countries in Southeast Asia, the Middle East, and Africa. For Indonesia, the agreement secures the planned acquisition of 48 aircraft and confirms industrial involvement, while reducing financial obligations. For South Korea, the deal removes a long-standing obstacle, clarifies the financial structure of the program, and enables uninterrupted progress toward full-scale production.
As of mid-2025, Indonesia’s fighter jet procurement strategy involves several confirmed, prospective, and cancelled programs across multiple countries, apart from the KF-21. A total of 42 Dassault Rafale F4 jets have been ordered from France in three tranches since 2022, with deliveries starting in 2026 and a potential follow-on order for a dozen more under discussion. From the United States, Indonesia signed an MoU for 24 Boeing F-15EX (F-15ID) fighters, with up to 36 approved for sale by the U.S. State Department, though final contract negotiations are ongoing. In June 2025, Indonesia signed a $10 billion deal with Türkiye to procure 48 TAI KAAN fifth-generation fighter jets, with initial deliveries expected in 2028 and local industrial participation confirmed. Jakarta is also evaluating China’s offer of up to 42 used J-10C fighters, which are under review for cost-effectiveness and performance based on Pakistan’s operational experience. A previously signed $1.14 billion contract with Russia for 11 Su-35 fighters in 2018 has been effectively stalled since 2020 due to the threat of U.S. CAATSA sanctions and budgetary concerns, though Russia claims it remains in force.
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On June 10, 2025, during IndoDefense 2025, South Korea and Indonesia finalized a revised agreement that adjusts Jakarta’s financial contribution to the KF-21 Boramae fighter jet development program. The agreement was reached during a trilateral meeting in Jakarta attended by South Korean Defense Minister Shin Won-sik, Indonesian Defense Minister Prabowo Subianto, and Hanwha Aerospace CEO Son Jae-il. The updated contract reduces Indonesia’s share from 1.6 trillion won (approximately $1.168 billion) to 600 billion won (approximately $438 million).
Follow Army Recognition on Google News at this link
The initial financing agreement for the KF-21 Boramae called for South Korea to fund 60 percent of the project, Korea Aerospace Industries (KAI) 20 percent, and Indonesia the remaining 20 percent. (Picture source: KAI)
In addition to modifying the financial contribution, the agreement establishes an alternative payment structure, reaffirms the planned transfer of 48 aircraft to Indonesia, and confirms the continued participation of PT Dirgantara Indonesia (PTDI) in production. The renegotiation follows delays in payments, repeated discussions over the past five years, and concerns raised by South Korea in 2024 over Indonesia’s fulfillment of its obligations.
The revised amount of 600 billion won (approximately $438 million) represents a significant reduction from the original commitment, with the updated contract stipulating that Indonesia must pay 30 billion won (approximately $21.9 million) within 90 days of the agreement’s signing. Jakarta has already transferred 9.4 billion won (approximately $6.86 million) as an initial payment. According to South Korea’s Defense Acquisition Program Administration (DAPA), the revised arrangement maintains Indonesia’s 48-aircraft allocation and includes provisions allowing Indonesia to settle part of its contribution through alternative payments, including commodities such as palm oil and coffee. This barter arrangement had previously been discussed in 2022 and is now formally integrated into the contract. The revised deal does not change Indonesia’s stake in the number of aircraft but reflects a financial reassessment in light of prior delays and renegotiations.
Indonesia’s payments to the KF-21 program began falling behind as early as 2019. As of late 2023, Jakarta had contributed only 278.3 billion won (approximately $203.16 million), significantly below the amount originally agreed upon. Negotiations continued over several years without resolution, despite a visit by Prabowo to South Korea in 2020. The South Korean Ministry of National Defense, particularly through statements made by Minister Shin in April 2024, publicly emphasized that Indonesia would need to honor its financial obligations in order to remain part of the program. Without revised terms, Indonesia risked exclusion from the development and production phases. The new agreement is the result of these protracted discussions and introduces a clearer payment schedule, alternative settlement options, and the confirmation of Indonesia’s industrial and procurement role.
The KF-21 joint development program began with a memorandum of understanding signed in 2010 and was formally launched in 2015. The initial financing agreement called for South Korea to fund 60 percent of the project, Korea Aerospace Industries (KAI) 20 percent, and Indonesia the remaining 20 percent. As the program advanced, several structural and political changes occurred. In March 2024, Hanwha Aerospace replaced KAI as the program’s prime contractor, becoming responsible for overall project management. This internal change placed Hanwha in a leading position for further negotiations, including the June 2025 meeting in Jakarta. In addition to continuing its payment obligations, Indonesia will retain involvement in parts manufacturing through PTDI, which is assigned to produce fuselage and airframe components.
Under the revised agreement, Indonesia’s role in the program will continue through PTDI’s manufacturing of aircraft components and future involvement in maintenance and support operations. This arrangement ensures that Indonesia remains integrated in the program’s industrial and logistical network, including support infrastructure for the 48 aircraft it will acquire. The ability to provide commodities for partial payment also aligns with previous suggestions made by Indonesian authorities, who had proposed offset mechanisms during earlier discussions. The contract enables Indonesia to avoid program withdrawal and preserves the structure of bilateral cooperation. Although Indonesia’s financial share has been lowered, the country retains access to both operational assets and domestic industry participation.
The South Korean government views the resolution of the issue as a step that enables the program to proceed without the uncertainty caused by unpaid contributions. Production of the KF-21 is scheduled to begin by the end of 2026. Currently, six prototypes are undergoing flight testing. These trials have included supersonic flight and weapons carriage, with recent images confirming the presence of the IRIS-T short-range air-to-air missile on at least one aircraft. The KF-21 is designed to replace older F-4 and F-5 fighter aircraft within the South Korean Air Force. With the revised agreement, Indonesia remains the only international partner in the program, and its continued presence could support South Korea’s efforts to export the KF-21 to additional markets.
The renegotiated terms may also serve as a model for future international cooperation frameworks where partial payments and industrial participation are adjusted based on national economic conditions. Hanwha Aerospace is now expected to lead export-related discussions, leveraging Indonesia’s continued involvement as a demonstration of international collaboration. Potential markets for the KF-21 include countries in Southeast Asia, the Middle East, and Africa. For Indonesia, the agreement secures the planned acquisition of 48 aircraft and confirms industrial involvement, while reducing financial obligations. For South Korea, the deal removes a long-standing obstacle, clarifies the financial structure of the program, and enables uninterrupted progress toward full-scale production.
As of mid-2025, Indonesia’s fighter jet procurement strategy involves several confirmed, prospective, and cancelled programs across multiple countries, apart from the KF-21. A total of 42 Dassault Rafale F4 jets have been ordered from France in three tranches since 2022, with deliveries starting in 2026 and a potential follow-on order for a dozen more under discussion. From the United States, Indonesia signed an MoU for 24 Boeing F-15EX (F-15ID) fighters, with up to 36 approved for sale by the U.S. State Department, though final contract negotiations are ongoing. In June 2025, Indonesia signed a $10 billion deal with Türkiye to procure 48 TAI KAAN fifth-generation fighter jets, with initial deliveries expected in 2028 and local industrial participation confirmed. Jakarta is also evaluating China’s offer of up to 42 used J-10C fighters, which are under review for cost-effectiveness and performance based on Pakistan’s operational experience. A previously signed $1.14 billion contract with Russia for 11 Su-35 fighters in 2018 has been effectively stalled since 2020 due to the threat of U.S. CAATSA sanctions and budgetary concerns, though Russia claims it remains in force.
